EU 2030 triple-target “could save 21 billion”

merkel_gabrielGermany, Denmark and Portugal renewed calls for the EU to adopt binding 2030 targets for renewables, energy efficiency and greenhouse gas (GHG) reductions at a crucial Heads of State meeting next week as a new study claimed an ambitious triple-goal approach could save up to €21 bn ($26.6 bn).

The three nations revealed their positions at an event yesterday in Brussels hosted by the German Federal Ministry for Economic Affairs and Energy.

Their call came as two new studies confirm that a triple-target approach will lead to significant cost savings, compared to a single GHG target, because focused measures for efficiency and renewables will reduce uncertainty for investors – which in turn reduces the cost of capital and thereby overall system cost.

One report from Germany’s Fraunhofer research institute, released at the event, concludes that the economic impact of adding a 30% share of renewables and efficiency results in total system cost savings of up to €21bn ($26.6bn), compared to a single GHG reduction target, in which renewables would only reach 27%.

Moreover “a renewable energy target of 30% does not lead to higher average electricity generation costs,” according to the report, because the dedicated targets “reduce risk premiums, financing costs and support costs”.

A second report presented by Pantelis Capros from E3Mlab in Greece arrives at a similar conclusion, using the European Commission’s PRIMES energy model.

“By setting a reliable framework, the overall financing costs can be significantly reduced. Therefore overall energy system costs of achieving the additional targets are lower compared to a scenario without specific targets”.

The German and Danish positions are identical. Both governments call for a 40% reduction in domestic GHG emissions; a binding 30% target for renewable energy; and 30% efficiency.

Portugal’s ambition level for renewables is significantly higher. It wants a binding 40% renewables target and an additional target to increase the level of grid interconnection between the 28 member states. “Only with binding targets can we get the results,” secretary of state Paulo Lemos said yesterday in Brussels.

“With binding targets, industry can perform. Portugal’s investments in renewable energy have paid off in the form of reduced [energy] imports. That has a big impact on Portugal’s balance of payments.”

“We need investor certainty. If we act hesitantly, the risk premiums will go up and the cost for consumers and industry will go up,” director of the Danish Energy Authority, Morten Bæk, added.

“Europe needs to invest billions in energy and power plant. Renewable energy and efficiency are the lowest cost options and they offer the highest returns,” said Rainer Baake, state secretary at Germany’s Ministry for Economic Affairs and Energy.

“It is not an issue of technology. We have the technologies and we have sufficient solar and wind resources to power, even a large industrial economy such as the German. It is not an issue of cost, either.

“Gas cost more or less the same as PV and wind. And looking at the UK’s Hinkley decision, I think the cost of nuclear energy in the UK will be 50% to 100% higher than renewables in Germany. ”

Baake added: “I don’t know how many nuclear reactors they will build in the UK before the consumers starts complaining about cost. Germany wants competitive electricity prices and it is a question of the right market design.

“That is why we have an interest in organising things in the best way with our European neighbours and partners. For that we need long-term targets.”

While Germany’s minister for Economic Affairs and Energy, Sigmar Gabriel, has already supported the 30% renewable energy target, Chancellor Angela Merkel has not yet thrown her weight behind the 30% renewables target.

Sources tell Recharge that her cabinet is reluctant to put their boss in a situation where she could potentially lose face.

However, the Chancellor’s full support would be needed for Europe to adopt a 30% renewables target.

A draft version of the Council Conclusions dated 13 October, includes a target for renewables of “at least 27%” and an indicative efficiency target of 30%.

 

Published in Recharge, 15 October 2014

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